Interview: Rashid bin Ali Al Mansoori
What impact will sharia-compliant exchange-traded funds (ETFs) have on boosting liquidity in the local market?
RASHID BIN ALI AL MANSOORI: ETFs play an important role in providing investors with a means to diversify their portfolios, and there are two listed on the QSE. The first – the QE Index ETF – tracks the performance of the QSE’s 20 largest and most liquid companies. Meanwhile, the second – the Al Rayan Qatar ETF – tracks the QE Al Rayan Islamic Index and is the largest single-country Islamic ETF in the world by assets under management. Although not actively being traded at the moment, the QSE is working with the issuer and a liquidity provider to boost its availability and attractiveness.
Increasing liquidity in the market is a challenge that we at the QSE take very seriously, and we have a task force that constantly monitors our performance and makes recommendations for improvement. We proactively engage with the asset management industry both domestically and internationally, and regularly showcase our listed companies at roadshows around the world. We are actively encouraging listed companies to appoint liquidity providers for their shares, and are also urging some of our members to become market makers. Most importantly, the QSE is meeting with family- and government-owned companies across all sectors of the economy to promote listing on the exchange as an attractive option that benefits not only the company, but the economy as a whole.
In what ways will emerging technologies such as blockchain transform financial services, and what segments stand to benefit the most?
AL MANSOORI: The distributed ledger technology (DLT) that underpins cryptocurrencies – better known as blockchain – has the potential to transform the financial services industry. The number and range of uses is vast, and there are already applications where DLT has been deployed, most notably for trade finance. However, moving applications from the development stage into production is taking longer than many of the DLT backers originally trumpeted.
Cryptocurrencies have also not lived up to the hype and have yet to go mainstream. As an alternative asset type they leave a lot to be desired. As a means of exchange, they remain deeply flawed, not least because of their use in criminal activities.
Even so, I do see a future for DLT – particularly in the area of smart contracts – as evidenced in their use in trade finance. Beyond the trade function, capital markets will ultimately benefit from the immutability and immediate settlement benefits that are afforded by the technology. I do not believe, however, that these changes will occur as quickly as some have previously suggested.
How has access for international investors evolved in recent years, and what needs to be done to improve this further?
AL MANSOORI: We have seen a pronounced increase in the number of foreign investors active in our capital markets in recent years. Although foreign institutions and individuals own slightly less than 9% of the market’s capitalisation, these entities account for more than 30% of its trading volume. Foreign investors have proven to be much more active traders than our domestic investors.
Of course, our upgrade by MSCI from a frontier to an emerging market in 2014 had a marked impact on both our liquidity and the visibility of our market on an international scale. We are now concentrating on actions and policies that will make it easier for foreign investors to access our market, including simplifying the account opening process without compromising either security and adherence to antimoney laundering regulations, and attracting international brokers to be members of the exchange.
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